HOUSTON (ICIS)--The US Environmental Protection Agency’s (EPA) proposed Tier 3 vehicle emission and fuel standards would be extremely costly and would not provide measurable ozone air quality benefits, the American Petroleum Institute (API) said on Tuesday.

“The massive refinery investment it will require would drive up the cost of making gasoline and weaken the nation’s energy security without providing much, if any environmental benefit,” said Patrick Kelly, API’s downstream senior policy advisor.

“We’ve looked at the costs; we know it’s high. We’ve looked at the benefits; we know it’s low,” Kelly said during a conference call on the API’s comments to the EPA. “Now, we’ve got an EPA process that’s pushing it through at an awfully fast pace, and the studies that we’ve looked at show that this lawmaking, as well as other lawmaking, is a recipe for disaster.”

Tier 3 Regulations

In March, the EPA issued a proposed rule designed to reduce air pollution from passenger cars and trucks.

Tier 3 would require that federal gasoline contain no more than 10 parts per million (ppm) of sulphur on an annual average basis. This is a drop from the 30 ppm cap set by Tier 2, which the EPA said has resulted in gasoline sulphur reductions of up to 90%.

The EPA is also proposing to either maintain the current 80 ppm refinery gate and 95 ppm downstream caps or lower them to 50 and 65 ppm, respectively.

Tier 3 would also reduce emissions of many air toxins such as benzene, 1,3-butadiene, acetaldehyde, formaldehyde, acrolein and ethanol, with reductions ranging from 10-40% of national emissions from on-highway vehicles, the EPA said.

For light-duty vehicles, proposed non-methane organic gases and NOX tailpipe standards would represent about an 80% reduction from today’s fleet average and a 70% reduction in per-vehicle particulate matter (PM) standards, the EPA said. Heavy-duty vehicles standards would represent about a 60% reduction in both fleet average emissions and per-vehicle PM standards.

The EPA is also proposing to extend the regulatory useful life period during which the standards apply from 120,000 miles (190,000 km) to 150,000 miles.

“Tier 3 is among the most highly cost-effective air quality control measures available,” the agency said.

The programme would cost about 1 cent/gal of gasoline and about $130/vehicle, the EPA said.

The annual cost of the overall programme in 2030 would be about $3.4bn, but the annual monetised health benefits would be $8bn-23bn, the agency added.

Criticism on Costs

The API has been active in opposing the proposed Tier 3 rule, testifying at an EPA hearing in April that the standard could have significant impacts on domestic refiners, which are already heavily regulated.

The organisation argued that a study by energy consulting firm Baker & O’Brien showed that the rule would add nearly $10bn in up-front capital costs and that annual compliance costs would be $2.4bn, or 6-9 cents/gal of gasoline.

Furthermore, Tier 3 would not provide measurable ozone air quality benefits, according to a study conducted by environmental consulting group Environ.

“Implementing the new sulphur standards could actually increase refineries' CO2 [carbon dioxide] emissions because of the need to get energy-intensive hydrotreating equipment to reduce sulphur to a minimum level,” Kelly said.

“Unfortunately, Tier 3 is not the only rule EPA has in mind for our nation’s refineries,” he added.

Additionally, the API said that refiners have to meet “increasingly burdensome” requirements set by the Renewable Fuel Standard (RFS), a fuel volume mandate established to boost ethanol, biofuels and other renewable resources in the US.

Citing a study by NERA Economic Consulting, the API said RFS requirements could increase gasoline costs by 30% and result in rationing and other serious disruptions in the transportation sector and severe economic damage.

“On top of that, other regulations affecting refineries – rules whose costs have not yet been fully analysed – could add substantially to this burden,” Kelly said. “They include greenhouse gas rules, new source performance standards and more stringent ozone standards.”

The organisation urged that once the EPA has published the proposed rule in the Federal Register, the agency should schedule a public hearing and allow enough time for public comment following its publication.

“Respecting the statutory rulemaking process in this case is particularly important because the proposal is hard to justify and potentially very harmful,” Kelly said.